On today’s very special edition of CBT News, our host, Jim Fitzpatrick visited AutoNation‘s corporate headquarters in sunny Ft. Lauderdale, Florida to be with the one and only Ms. Cheryl Miller, new CEO of AutoNation. Cheryl is AutoNation’s first female CEO, and in fact, the first-ever female CEO of a publicly-traded auto group. Cheryl has been with AutoNation for the past eleven years, including spending the last five as CFO. In part one of their conversation, Cheryl discusses her automotive background and ground-breaking rise to CEO.
Be sure to stay tuned for part two of our interview with Cheryl Miller, coming soon.
[Previously recorded 10/10/19]
VIDEO TRANSCRIPT:
Jim Fitzpatrick: Hi, everyone. I’m Jim Fitzpatrick. Thanks so much for joining me on this special edition of CBT News. Back in mid-September 2018, Mike Jackson, industry icon and CEO of AutoNation, the country’s largest automotive retailer, announced that he would be stepping down in 2019 as CEO, and would be staying on as executive chairman. So began the board search for his replacement. I personally thought that this would have been a great opportunity for AutoNation to appoint a female CEO, and by doing so, lead the industry in attracting more females into the retail car business. In fact, when I interviewed Mike Jackson back in 2015, just after Mary Barra was appointed to head up GM, I asked him when we might see a woman as the CEO of a publicly-traded retail automotive group. Here’s what he had to say.
Jim Fitzpatrick: Which is a perfect lead into my next question. When do you think it’ll be that we see a woman heading up an automotive group? A retail automotive group?
Mike Jackson: Well, there must be somebody out there, right?
Jim Fitzpatrick: Well, let’s say a publicly traded group.
Mike Jackson: Oh, a publicly-traded group.
Jim Fitzpatrick: Do you think that’s in the near future, or do you think there’s… If you want to make any announcements today, feel free to do that.
Mike Jackson: We’re coming close. We just announced our new CFO.
Jim Fitzpatrick: Yes, you did.
Mike Jackson: Cheryl Scully.
Jim Fitzpatrick: Yes, yep.
Mike Jackson: Who is a woman.
Jim Fitzpatrick: Yeah, that’s right.
Mike Jackson: The whole company congratulated me. This is interesting. The whole company congratulated me for appointing a woman in this key C-suite position, CFO.
Jim Fitzpatrick: Sure.
Mike Jackson: I said, “Yeah, but she was the best person for the job.” So we’re getting closer.
Jim Fitzpatrick: We’re getting closer. Okay.
Jim Fitzpatrick: As you can see, he said back in 2014 that we’re on our way to hiring a female CEO, and in fact sounded to me like it might have been AutoNation’s CFO, Cheryl Scully Miller, the person Mike mentioned in our interview. In January of this year, while interviewing two of the industry’s most popular thought leaders, I said this.
Jim Fitzpatrick: This has to be a continuing conversation. It can’t be a one and done, and so I applaud all of your efforts. Certainly Brian, you’re doing a great job in bringing women into your organization, and that’s what we just need to see more of. Obviously, that’s what today’s show’s about. I would like to throw out the challenge to a company like AutoNation, to maybe be the first one out of the seven publics out there to appoint a president and CEO who’s female. There hasn’t been a company out there that’s done more for breast cancer awareness. Drive Pink. I say that we take it a step further, and talk to Mike Jackson. Put out the challenge to Mike Jackson, and the board of directors. To say, “Please, find us a very capable female, and let’s show the rest of the retail auto industry, because you’re the number one retailer to hire and recruit a female president and CEO.” If GM can do it, I say that AutoNation can do it.
Jim Fitzpatrick: Fast forward to March, 2019, when Mike Jackson announces that AutoNation had in fact found its new CEO, and his name is Carl Liebert. He comes from outside the industry, USAA Insurance Company. Needless to say, I was disappointed. The thought that AutoNation had this incredibly talented person in Cheryl Miller, who not only knew the car business, but also helped build AutoNation to the giant that it is today, was passed over for a guy that was the COO of an insurance company.
Jim Fitzpatrick: Well, most of you know how this story ended. Not very well. It seems that selling and servicing cars is not anything like insuring them. In less than 90 days on the job, Carl was asked to step aside, so AutoNation could right the wrong and finally give Cheryl Miller the job she so clearly deserves, CEO of AutoNation. Ms. Miller was kind enough to grant me an interview late last month to discuss her journey to the CEO’s position of AutoNation, and the issues facing the auto industry. Here’s part one of our two part interview.
Jim Fitzpatrick: I am so happy to be on location here at the AutoNation headquarters in beautiful Fort Lauderdale, Florida, to be with the one and only Ms. Cheryl Miller, who is the new CEO of AutoNation. Welcome to CBT News.
Cheryl Miller: Thanks, Jim. It’s great to be here with you today, an AutoNation alumni.
Jim Fitzpatrick: Great. That’s exactly right. Sure. I’d say welcome to CBT News, but we happen to be sitting in the Mike Jackson boardroom, right?
Cheryl Miller: We are.
Jim Fitzpatrick: With of course drive pink behind us. We’re going to talk a little bit about those things today. Drive Pink, I want to know where that campaign is, and where it’s going. I know you’ve got a huge commitment to that.
Cheryl Miller: Absolutely.
Jim Fitzpatrick: For the people that don’t know you yet, if maybe they’ve been living under a rock in the automotive space, and haven’t picked up an Automotive News, or tuned into CBT News, tell us a little bit about yourself, and your journey to get thus far, here to the CEO’s office.
Cheryl Miller: Yeah, Jim. I’ve been in automotive for a while. The interesting thing, I started my career back in the day at Circuit City’s corporate headquarters, and that was back when consumer electronics business was investment grade, and CarMax was in its infancy. I had that opportunity, and from there had a chance to come down to work for Republic Industries. As you remember back then, that was a waste division, owned by National Car Rental and AutoNation. I had a chance to see AutoNation early in its days, when we were acquiring. Every week, we were acquiring new assets. Went with the rental spend. National spun off into a separate public company, as you may remember, and went with that spin, and then had a chance to come back ten years later. Did distribution in between. When I think about my career, I’ve seen all sides of automotive, from rental, to distribution, captive finance to retail.
Jim Fitzpatrick: Right, including a stint at JM Family Enterprises, which is all automotive, right?
Cheryl Miller: Absolutely. The world’s largest Toyota distributor. I had the chance to work up there, with an amazing team, up at JM Family.
Jim Fitzpatrick: Sure, sure. We introduce you as the first female to take over a retail automotive publicly traded company. Are are you getting tired of that? It’s 2019, and we seem to be so excited that females can run a Fortune 500 company. Talk to us about that.
Cheryl Miller: Well, first thing I’d like to say is your crystal ball was really good. You called it.
Jim Fitzpatrick: Thank you.
Cheryl Miller: I’ll say thank you for your endorsement of diversity within our business. I know you have a personal commitment to that, so thank you for that. I’m never tired of it. I think it’s great, because I saw women like Mary Barra, and the example that she set for our industry. It was great to be able to come in, and I work with an amazing, talented team of 26,000 people, many of them women. Just the opportunity to continue to grow that base within AutoNation, and within the industry as a whole, is fantastic.
Jim Fitzpatrick: Sure, sure. Have you had any conversations with Mary Barra since you took the new position?
Cheryl Miller: I got a great email from her the first day. What was fun about the announcement was a lot of the friends, and former bosses, and a lot of associates emailed me right away. A lot of emails coming in at once.
Jim Fitzpatrick: Right. Right, I can imagine.
Cheryl Miller: I got a note from her, and have been in contact with her, and so she’s certainly very supportive of retailers, and we appreciate that.
Jim Fitzpatrick: Yeah, for sure. Mike Jackson made the comment when the big announcement was made that you are CEO ready. What do you think he meant by that?
Cheryl Miller: Well, I think it’s great when Mike Jackson, who’s an industry icon, says you’re CEO ready. That’s certainly a fantastic endorsement.
Jim Fitzpatrick: Yeah, it sure is.
Cheryl Miller: Mike and I have worked closely together for years. Mike and I literally officed next to each other for over six years. I think CEO ready, to me, means first understanding our business. We’re a retail business. We sell and service cars one by one, and we have to be associate focused and customer-focused. In addition to that, I’m fortunate enough to have some previous board experience. I sit on the board of Tyson Foods, one of the world’s largest food companies, as well. Previously served as audit committee chair there. I think understanding, from our investor lens, from our customer lens, so really being ready to handle that from a number of different perspectives.
Jim Fitzpatrick: Sure. You are CEO ready from day one, right? There’s no training you.
Cheryl Miller: Well, the nice thing is I’ve been trained over the years by a lot of great leaders, and so I had a lot of great mentors, including Mike. The opportunity to have him also serve as executive chair now. I run the company, and he serves as executive chair for the company, and it’s certainly great to have an industry legend accessible as a mentor.
Jim Fitzpatrick: Yeah. Let’s talk a little bit about that for just a second. Mike Jackson is an icon in the industry, as you know, and kind of the face of the retail automotive world. Whenever an issue comes up, we kind of all turn to him and say, “What say you, Mike, about this particular issue?” He speaks at NADA, and so many other conferences that we attend, JD Power and such. Will you kind of be finding your way to becoming the new face of the retail automotive industry?
Cheryl Miller: Absolutely. We’re not giving up the pole position. AutoNation has the pole position in the industry. We’re keeping it.
Jim Fitzpatrick: Okay, great. Little race car…
Cheryl Miller: Mike and I will both keep that. I think the great thing is, in addition to Mike’s background in automotive, he also speaks broadly about the economy. Having been on the Federal Reserve board, chairing the Atlanta branch, certainly a great experience there. Certainly with the amount of experience I have in the industry, there’s a lot of issues that need to be brought to the attention of different people at certain times, and I certainly intend to continue to do that, with a background in distribution, captive finance, and other areas as well.
Jim Fitzpatrick: Great, great. The stock took a jump when the announcement was made. I mean, it was like a 15% or 16% jump, and it’s kind of stayed there since, right?
Cheryl Miller: Yeah.
Jim Fitzpatrick: Talk to us about the impact that’s got on you, when you think, “Wow, the stock market has kind of endorsed this appointment, as well.”
Cheryl Miller: On the day of the announcement, I said thank you to 26,000 people, who delivered a second record quarter this year of results. That was really what helped drive the stock up. I think the other good piece is, I know a lot of the investors. I believe in relationships, and longterm relationships. From the equity analyst to investors that we had, I think the endorsement from them, not just of me, but of all of us as a company, was very helpful. I think also the market recognized that the retail sector maybe had been a little bit under valued, and so I think you saw the recognition of that, as all of the retailers were producing great results this year.
Jim Fitzpatrick: Yeah, for sure. You’re one of now 36 women that are the CEO of a Fortune 500 company. Talk to us about the responsibility there, and the feeling that goes along with that.
Cheryl Miller: Absolutely. When I think about that, I want to be one of the first of many. There’s many that came before me. Even in automotive, you’ve got Mary Barra, but also more broadly, you’ve got Pam Nicholson, and other great leaders within automotive. More broadly, I’m fortunate enough to participate in Fortune’s most powerful women network. I think being this year honored by being on ten to watch, or ten on the radar, from Fortune is just a great sign. When I think about the women in our company, when I think about just the broader talent in our company, I think it’s great momentum, and we want to continue to keep going.
Jim Fitzpatrick: Do you feel a special responsibility to females that are either in the industry, or specifically at AutoNation, to bring them up, and to fill some of the C-suite positions with capable females?
Cheryl Miller: Absolutely. I think about it from that lens, with respect to our controller university, our general manager university. We’ve got a lot of great programs, and I like to make sure that those programs with training have diversity in them. I think it’s important as we think about our associate base that we’re focused on it. I also think personally, from a board perspective, there’s a number of women I know that are board ready out there at different companies, and I like to put forth and endorse them for those seats as well.
Jim Fitzpatrick: Okay. As you know, the industry is a very male-dominated business. It has been probably since they rolled off the first Model T, a hundred plus years ago. From your perspective, what has to happen in the industry for this to change? For us to be looking ten years down the road and saying, “50% of our employees are female, and 50% are male?” What has to happen?
Cheryl Miller: Jim, it’s a great question. When you think about purchases, and you think about the customer, 80% of purchases are influenced by women. If you think about the amount of female buyers, and then you compare that to females in the industry, there’s a bit of a disconnect. We want to continue, in AutoNation’s case, to resemble the communities that we operate in. When I think about initiatives from our perspective, it’s something I’m very focused on. Some of the things that need to happen is training, flexible hours. I think that’s not just for women, that’s for millennials, and that’s for other associates. The old 55 to 65 hour a week, that doesn’t always cut it anymore, and so we’re focused on 45 hour a week targets for scheduling.
Cheryl Miller: We’re focused on things like Pay Plan Plus, which was an initiative that we put in place to have some type of, not just commission, but a little bit of base salary to start, as we get people trained in the industry. It’s important we keep looking at things like that. We look at maternity benefits. We’ve also put forth a cancer benefit, in the unfortunate circumstance that one of our associates or their dependent is diagnosed with cancer. There’s a lot of different things that we’re doing to broaden out the portfolio and platform to attract all different kinds of diverse associates.
Jim Fitzpatrick: Yeah, for sure. It seems as though it’s been kind of the good old boy network, and there’s been dealer groups out there that have talked a big game and said, “No, we want to bring females in,” but they continue to have 60 hour work weeks, and they continue to have showrooms that are not necessarily friendly to females coming in. You know, it seems to be kind of the good old boy network. I’m probably going to get some emails from my friends in the car business.
Cheryl Miller: Yeah, that’s not AutoNation, though.
Jim Fitzpatrick: It’s not AutoNation, but it is what it is out there in the industry. It’s good to hear that you’re saying, “No, we want to welcome everyone into AutoNation, and it doesn’t matter the gender that you are,” right? And it shouldn’t.
Cheryl Miller: Yeah. It doesn’t matter the gender you are, it doesn’t matter the color you are. I think that it’s important that we’re out there looking for broad talent, and we want to resemble the communities that we operate in, and we want to treat everybody with respect. There’s all different places that shows up, and that’s something that across our 26,000 associates we’re very focused on.
Jim Fitzpatrick: Sure. You mentioned that the diversity… You’re also Puerto Rican.
Cheryl Miller: I am.
Jim Fitzpatrick: That’s probably something a lot of people don’t know about you, but that’s kind of a cool fact, that we’ve got a Puerto Rican female as the CEO of AutoNation now, right?
Cheryl Miller: Absolutely. Something I’m very proud of. When you think about all elements of diversity, I think it’s important that we’re out there, again, with our communities. A lot of our customers speak Spanish, and it’s important that we’re balancing that, and we’re meeting the customer where they are. Whether that’s in store, whether that’s online, whatever it is.
Jim Fitzpatrick: Sure, sure. You talk a lot about the customer, which I’m going to get into here. For the past five years or so, we’ve been hovering around 17 million [SAR] out there, although there seems to be some headwinds that dealers are concerned with. It looks as though we may be dipping down a little bit in the SAR. Maybe, you know, the mid sixteens. Is AutoNation ready for that, and how does it make up for the loss of gross profit if that happens?
Cheryl Miller: Yeah, so Jim, the great thing is, I remember 2008, 2009, when it was under 10 million, so it feels a lot better than then. If you roll back eight years ago, we always said we think the SAR’s going to plateau somewhere around 16 and a half to 17 million, and that’s exactly where it did plateau. We certainly are in a plateau phase. We do expect some downward pressure in retail sales. Certainly fleet has supported some of the 17 million SAR that we’re likely to see this year. But we’re certainly ready for that, and we’ve been prepared for that with our brand extension initiative. In addition to selling new and used vehicles, as you know, a lot of our profitability comes from parts and service. That’s something that we’re focused on continuing to extend into collision, where we are one of the larger collision operators on the… Especially on the dealership side, within the business, and also into parts. Those are initiatives that we’re very focused on as we hit this plateau in new vehicle sales.
Jim Fitzpatrick: You guys launched the 1Price concept, right?
Cheryl Miller: Mm-hmm (affirmative). Yeah.
Jim Fitzpatrick: Among all of the used car stores, right? Is it on the new car franchises, as well?
Cheryl Miller: At the moment, it’s on the used car side. The way I think about that is, there’s a lot of transparency. Our customers, and our associates, really embraced 1Price in the used part of the business, and we are not 1Price in the new part of the business.
Jim Fitzpatrick: Okay. Do you think consumers want 1Price? Do you think that’s your advantage in the marketplace? That it makes it easier for customers and…
Cheryl Miller: Yeah, the consumers love 1Price, and our associates love it, too. I think you can maintain gross profit with a fair price, right? What consumers want is transparency, and they want fairness and clarity. We do that both in store and online, as well. It’s been great for us, and we’ve seen the results of that coming through.
Jim Fitzpatrick: Sure. Do you see a day that it would, the 1Price would find its way over to the new car side?
Cheryl Miller: Well, I know Saturn tried that a long time ago. On that price, I’d say certainly not.
Jim Fitzpatrick: That was a little Saturn reference.
Cheryl Miller: Certainly not… Yeah, I’ve been in the car business a long time. Certainly not today. I think there’s a slightly different model in new, but again, we do want to continue to offer transparency in pricing in new, as well as in service. We think it’s important, on the service side of our business, to offer better transparency.
Jim Fitzpatrick: Okay. It seems as though the 1Price sales concept is much more conducive to hiring a better quality sales associate. Does that make sense, and have you found that to be the case?
Cheryl Miller: I think when you consider 1Price, there’s less negotiation. One thing that people may not view as part of their role is negotiating. Some people are more comfortable with that than others. For those associates that prefer some different parts of negotiation rather than price negotiation, that does open up some roles for associates, as well.
Jim Fitzpatrick: It may be a little bit more conducive to even bringing females into the industry. Those that don’t want to spend so much time clobbering a customer, and I say that affectionately. Clobbering customer…
Cheryl Miller: We don’t clobber at AutoNation.
Jim Fitzpatrick: Not at AutoNation, no. I’m talking about the other retailers.
Cheryl Miller: Okay.
Jim Fitzpatrick: That battle that takes place with consumers when they come into a showroom, you know?
Cheryl Miller: Yeah, we run a different model, but I think it’s a great point. Also one of the things that we emphasize in training a lot is e-com. Because a lot of times, the customer’s not even in the showroom. If you think about traffic flow, the customer’s coming through the computer, and so you have to effectively engage with that customer online. Pricing ties into that customer service response time. One of the things we’re focused on is we have to be out ahead of and responding to customers, meeting their needs, meeting them where they are. Some customers love the idea of omni channel. Some customers want to come in and have validation. Other customers just want their seventh Camry, and they want it delivered to their house. We’re there to meet the customer wherever they are. Sure.
Jim Fitzpatrick: Digital retailing, what you were just talking about, let’s kind of drill down on that a little bit. Dealers are still trying to get their head wrapped around what a true digital retail experience looks like. The concerns are, “Are we going to give up [F&I] profit if the customer’s not sitting in front of us in the F&I office?” Are there any concerns that you’ve got there, that digital retailing, while the customer may like it, and they see Carvana, or they see Vroom having a vehicle delivered right to them, is the retail side ready for that?
Cheryl Miller: I think with respect to digital, we want to meet the customer where they are. This is the second largest purchase that most customers make in their life. In many cases, the customer wants validation. For certain people, it can be a little bit intimidating. A car is showing up in your driveway. If it’s not the color you really wanted, you don’t quite fit in it the way you thought, it’s a little bit intimidating. Some customers love it. Some customers prefer a little bit of bricks and mortar. It’s certainly hard to service. It’s hard to actually service the car online fully. When we think about the customer, those are some of the things that we’re viewing from their lens.
Cheryl Miller: With respect to F&I profitability, we feel really good about our process, and our transparency. Value added products. AutoNation branded products. That was the first thing that we extended into with the brand, was CFS products. We feel pretty good about that, but we do need to make sure that as we go online, we’re meeting the customer where they are, and they’re understanding the products. Because I hate to have a situation where a customer doesn’t buy gap insurance, because they didn’t know about it. They didn’t understand it. Then later, if there’s an accident, they have a financial burden that they didn’t anticipate happening.
Jim Fitzpatrick: Yeah, that’s right.
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